Unbranded to Unforgettable: How Korosh Farazad Reinvents Hospitality | Ep 210 with Korosh Farazad Founder of Farazad Advisory

Summary

Founder's Story: Unbranded to Unforgettable – How Korosh Farazad Reinvents Hospitality

Episode Overview In Episode 210 of IBH Media's Founder’s Story, host engages in an insightful conversation with Korosh Farazad, the Managing Director of Farazad Advisory. Farazad shares his extensive experience in real estate and hospitality investments, delving into his investment strategies, the importance of customer experience, overcoming business challenges, and his recent strategic move to Switzerland.

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1. Introduction to Korosh Farazad

The episode kicks off with the host introducing Korosh Farazad, highlighting his global expertise across Europe, North America, and Asia Pacific. Farazad is recognized for his deep involvement in structured financing and engineering within complex real estate transactions.

Host: "I'm very interested to hear the state of how everything is. I know you recently moved to Switzerland. We can talk through that too."

[00:30]

2. Spark of Passion: Real Estate and Hospitality

Farazad discusses the origin of his passion for hospitality intertwined with real estate. He emphasizes the intricate value creation behind hotels and his affinity for engaging with people, which steered him toward the hospitality sector nearly two decades ago.

Farazad: "Putting real estate and hospitality into one sentence just sparked my attention... being in the hospitality industry, you have to be hospitable, so to speak."
[01:16]

3. Investment Philosophy and Strategies

Farazad outlines his firm's investment philosophy, focusing on value-adding opportunities rather than core assets. He prefers investing in hotels without established brands, aiming to revamp them by introducing franchise operators and enhancing food and beverage concepts tailored to the hotel's identity and regional appeal.

Farazad: "We look for opportunities that are value adding, upside. We don't look for core assets... we look at how we can revamp the opportunity by bringing in a franchise operator."
[02:36]

4. Criteria for Hotel Investments

Delving deeper, Farazad specifies the criteria his firm considers when evaluating potential hotel investments. Key metrics include the size of the property, with a preference for hotels housing between 85 to 200 rooms to maintain a quality hospitality experience. He also explains the financial structuring, often acquiring a majority stake while allowing current owners to retain a minority share, thereby aligning interests and sharing future upsides.

Farazad: "We look for at least a minimum of 85 rooms and above maximum is 200 because anything above 200 becomes a room factory... we give a minority stake as our local sponsor."
[04:11]

5. Enhancing Customer Experience

The conversation shifts to the critical role of customer experience in hospitality. Farazad highlights the necessity of engaging guests from the moment they check in, ensuring a variety of on-site options like signature restaurants and quality bars to keep guests within the hotel premises, thereby driving revenue beyond standard occupancy metrics.

Farazad: "Customer experience or guest experience is the most important thing... you have to hold them there for 24 hours by doing that."
[07:02]

He cites SLS Dubai as an exemplary model, praising its comprehensive service and attention to detail that consistently captivates guests.

Farazad: "The SLS Dubai... customer care that is just mind blowing... it captivated me to use that as the first brand."
[07:02]

6. Overcoming Business Challenges

Farazad shares candid reflections on his journey, acknowledging numerous setbacks and failures that have shaped his resilience and business acumen. He underscores the importance of perseverance, continuous learning, and maintaining a positive outlook despite challenges.

Farazad: "I've managed to get up and just clean myself up and get back to business as usual... Without failure, there's no success."
[09:58]

7. Strategic Relocation to Switzerland

A significant portion of the episode is dedicated to Farazad's strategic decision to relocate his company from the UK to Switzerland. He explains that the UK market was undergoing a correctional phase, limiting growth opportunities. In contrast, Switzerland offered a more conducive environment for rapid transactions, enhanced efficiency, and greater transparency. This move allowed Farazad Advisory to accelerate its operations and secure new assets swiftly.

Farazad: "Relocating the company to Switzerland was a very quick decision... in London would have taken us six months. Over here, it's taking us five weeks."
[11:30]

He attributes the successful relocation to four key elements: great partners, prime location, efficiency, and transparency.

Farazad: "Great partners, great location, efficiency and transparency... got us to where we are today."
[11:30]

8. Insights on the UK Market Exodus

Farazad touches upon the broader trend of millionaires leaving the UK, corroborating it with personal observations. He reflects on the challenges faced by professionals in London, emphasizing the need for patience and strategic planning during market downturns.

Farazad: "Everyone's just miserable... London is going through a process and it just needs a little bit of tender loving care."
[12:33]

9. Personal Experiences and Relocation Benefits

The host shares personal anecdotes about Switzerland, echoing Farazad's positive experiences regarding safety, quality of life, and exceptional hospitality standards. This mutual appreciation underscores the benefits of Farazad's relocation decision.

Host: "Zurich was quite expensive. But great, great experience with hospitality. People were amazing."
[13:45]

10. Advice for Aspiring Entrepreneurs

Concluding the discussion, Farazad offers practical advice to those aspiring to enter the hospitality and real estate sectors. He emphasizes starting small, building a solid foundation, and cultivating a deep understanding of both the operational and customer-facing aspects of the business.

Farazad: "Start small and believe in what you're doing... You must either really have thick skin for it because it's really hard and more importantly you must have a good passion for it."
[14:18]

He likens entrepreneurial growth to a child's development, advocating for gradual progression and comprehensive learning.

Farazad: "A baby doesn't start doing marathons from the day they're born. They have to crawl first and then walk."
[14:18]

11. Final Thoughts and Contact Information

The episode wraps up with the host expressing admiration for Farazad's journey and success, while Farazad invites listeners to connect via email for further discussions and potential collaborations.

Farazad: "You can contact farazad advisory.com."
[19:08]

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Conclusion Episode 210 of Founder’s Story offers a deep dive into Korosh Farazad's innovative approach to hospitality and real estate investments. His emphasis on value addition, exceptional customer experience, resilience in the face of challenges, and strategic business decisions provides invaluable insights for entrepreneurs and investors alike. Farazad's journey underscores the importance of passion, adaptability, and strategic foresight in building a successful business in the dynamic hospitality industry.

Transcript

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[Host]

Hey everyone. Welcome back to founder story. Today we have Karosh Farazad, the managing director of Farazad Advisory. And we're going to talk through all things real estate, hospitality, investments. I know you're in Europe, North America, Asia Pacific. You are a veteran in structure, financing, engineering, challenging structures within real estate transactions. Like going to go into all these things. I'm very interested to hear the state of how everything is. I know you, you recently moved to Switzerland. We can talk through that too. But first though, I'd love to understand what, what was the spark around your obsession with hospitality and real estate? And was it, was it a specific moment that influenced you?

[Karosh Farazad]

That's actually a very good question. I've always been involved. I've always had a passion for real estate, but I've always had even more of a passion for hospitality. Seeing, you know, seeing different hotels. When I try, I mean, I travel a lot, but prior to getting engaged with the hospitality arena and on the real estate side, I just had this passion that putting real estate and hospitality into one sentence just sparked my attention. One of the elements was there's a lot of work that goes behind the scenes to create a value of a hotel. And that's really what that, that drove me into getting involved in the business. And more specifically, you know, being in the hospitality industry, you have to be hospitable, so to speak. So that was also another, another drive because I'm a people's person or at least, at least I think I'm a people's person. And it carried weight for me to, to explore the idea and tap into it. And I tapped into it about almost two decades ago.

[Host]

Hey, well, that's nice. If you're into hospitality, you can travel around the world and going to all these amazing hotels is really, you know, information you need. So you're kind of working and having fun at the same time. When it comes to hotels and hospitality, when you look at what you want to invest in, are there certain things that you're looking for?

[Karosh Farazad]

Yes, 100%. First of all, we look for opportunities that are value adding, upside. We don't look for core assets. And which, that, what that means in plain simple English is any, any hotel that is just brand new and is already stabilized. It's not for us. We look for hotels that don't have a brand on it like your Marriotts, your cores, your Hiltons, so on and so forth. We go in, we look at the opportunity, we see how we can revamp the opportunity by bringing in a franchise operator. We don't deal with long term relationships like hotel management agreements. We look for 10 year operators or 10 year franchises implementing food and beverage concepts that correlates with that hotel, with that region and gives options for the guests to have variety when they come in to experience the hotel. And then we keep it for about minimum three to five years is our objective. And mostly gateway cities in Western Europe, we do case by case other destinations, but it's really the gateway cities where there's a high penetration of, of inward tourists.

[Co-Host]

So let's say you have some hotel.

[Host]

Owners out there who are like, you know, I, I would love to, I would love to be involved in this. You know, I would love to get either an investment or, or roll up or however you would structure it. What would you say to these owners as to something that you're looking for? Is it they need a certain amount of locations, does it need to be a certain amount of rooms? Are there certain metrics that you're looking at?

[Karosh Farazad]

Very good question. Again, yes, we look for at least a minimum of 85 rooms and above maximum is 200 because anything above 200 becomes a room factory as we call it. Okay. It's just, you're not going to be able to get that relationship, the hospital hospitality experience. Of course the larger hotels can, but we're not, we're not, you know, those large groups, we are more smaller and we're leaner and we care for the, for the assets and therefore what our objective is. If a hotelier, a current owner says listen, I don't have the bandwidth to do what you guys do, okay, we don't go and purchase the hotel 100% outright. We give a minority stake as our local sponsor. Unless we have other local sponsors within the parameters of that hotel or within that region, I should say, and if it makes sense, then we keep them on board for let's say 20 or 30% of the, you know, of, of, of the ask price. So for example, if, if, if a hotel is, for the sake of this conversation, if it's $10 million, we say, okay, we will pay you 8 million 2 million, we won't pay you and the 20% remains yours. But then you get the upside of it. What is that upside is post stabilization and the value add the elements that I've already described by revisioning the food and beverage concept, putting a brand in there, putting it into a reservation motor or engine, then what happens is that you automatically generated a good revenue post your, post the investment and that is, you know, that could range from subject to jurisdictions. It can go from anywhere from 1.8 to 3% or 3x of your money. Okay, so that's a pretty good return if you think about it. Is it always like that? No, it's not always like that. We, we, we try to be very, very, very conservative with our numbers, but achieve the end results and, and to make sure that not only we're satisfied, but the exit buyer that's going to purchase that hotel from us is satisfied knowing the fact that they're getting something that can run for a, at least a decade. Post the post us selling it to them.

[Host]

Being in the hospitality industry previously myself, I can relate to the fact that many of these companies, they, they don't stay up with technological trends or like you said, building a brand marketing. There's a lot of things that they don't do. I know a lot of people that say I want to just open up a hotel, but don't realize how hard it is and how much work goes into it. So if you were to look at, you know, the perfect hotel that you visit, what are you looking for or what, or maybe even an example of, of a hotel that, that really wows you.

[Karosh Farazad]

Customer experience or guest experience is the most important thing. The moment the guest enters to check in, that's when you've caught the guest's attention. If you let that guest go check in and then go out to have their cocktails or to have their snacks, you've lost that guest. That's the way I look at it. So technically it's like a mousetrap formula. Once your guest enters your, your premises, you have to hold them there for 24 hours by doing that, meaning you have to have options for them. Okay, so options means what type of off, what type of all day dining is your hotel providing? What type of a signature restaurant that correlates with the brand, that correlates with the region and the story within that hotel is providing. And on top of that you have the nightcap. You know, every, every restaurant, every hotel must have a decent bar, okay? Because these are revenue generators. You can't Just rely on the revpar and the ADR in your occupancy. You also have to rely on what other revenue generators or models you've implemented in the hotel. And, and, and to, to answer your other question with regards what experience have I seen? One of the best experiences I've had goes to the SLS Dubai. From the, from the moment. And this, this hotel was, was, was built several years ago and it's magnificent. From the, from the moment you enter the hotel you have options and the customer care, that is just mind blowing. Of course everyone says, well Dubai has the best service all around the world. It's like Singapore, blah blah, blah. Yes it does. But customer attention is important. Just by providing a service and not attention to detail is not the same thing. And this is where SLS would probably be one of those hotels that I really enjoyed and you know, it's, it's, it has my heart. Of course there are other, there are other hotels that I could think of but that one, yeah, that captivated me to use that as the first brand.

[Co-Host]

It's amazing how when you think of.

[Host]

A trip, I, I don't really remember much about that trip but I always remember the hotel like, you know, I see so many castles or churches or sites that to me they all start to feel the same but I really, really pay attention. Like you, like what you're saying to the hotel and if the experience of the hotel is great, then I tell.

[Co-Host]

People to go back to that city.

[Host]

It's not even just about the hotel. Sometimes it's like the whole city is represented by that hotel. I'm, I'm curious about your experiences just in, in business in general, was there ever a time where you said, you know what, I'm just going to give up or maybe a challenge that was just so big, but you were able.

[Karosh Farazad]

To solve it a zillion times and if I told you no, I would be lying to you a zillion times. I have fall flat in my face many times and I've managed to get up and just clean myself up and get back to business as usual. And I think this is one of the reasons why I, some people call me a bit too abrasive. It's not being abrasive. I just know the business and that's only because of, of the experiences I've had, both bad and good, more bad than good. And those elements of bad experiences and bad decision makings or bad investments puts you into a better perspective when it comes to the opportunity. So there is no business that in my experience at least, and I think the right players, if you speak to them, they will probably say the same thing. Without failure, there's no success. And those failures are what got me into the position that I gratefully, I can say today, you know, relocating the company to Switzerland was a, was a very quick decision. And that decision was based on the fact that we weren't beginning to see limited value add, or as I call it, not to be disrespectful towards the uk. We outgrew UK markets. Okay. So we needed a little bit more opportunities in terms of transactions, in terms of assets. And in terms of mindset, UK was a little bit, or it still is, is going through a correctional phase. And I think that correctional phase is going to take at least 7, 8, 9 years before it revamps itself. So therefore we didn't want to ride the negative wave. And that's why Switzerland was one of those ideas. And with that said, we physically moved everything and relocated in December 2024. And we signed up our first assets in Switzerland last month. So it kind of shows you how quickly things can move if the right decisions are made. And you know, the same type of a story when it comes to Switzerland versus the uk It's a transaction this magnitude in London would have taken us six months. Over here it's taking us five weeks. So kind of tells you the story in, you know, in a nutshell. One, great partners, two, great location, three, efficiency and four, transparency. These four elements or these four elements within the formula got us to where we are today and we're super grateful for it.

[Host]

Yeah, I heard some news around, I don't know, 10,000, 11,000 millionaires just left the UK.

[Karosh Farazad]

There is a lot of truth in it. I mean, I, I, we still have offices in London, so it's a rep office now because most of our people have been relocated and, and, and actually to Switzerland. We still have a few more people there, which the relocation process is going to take place. But going back to your initial question, you're not hearing false information when you're physically on the ground. And now when I go back, I see what's going on on the ground and I'm like, oh my God. I used to be one of them. Everyone's just miserable and I feel really bad for them. I was one of those people, I would go to work like, you know, another day at the office. You know, you just kind of freaking out because you don't know where this is going. So it is a, it is a, unfortunately, as, as Charming as London is and as always will be a charming city, it's just going through a process and it just needs a little bit of tender loving care. Tlc.

[Host]

Yeah. We were just in, in Switzerland and a friend of mine, he had moved to Zug and he was like, I love it here. My kids walk to school and it's super safe and it's amazing. And we went around the lake and I was like, this is a beautiful, an absolute beautiful place to live.

[Co-Host]

Probably the most expensive place I've ever been.

[Host]

Yeah, on vacation. It was pretty. Zurich was, was quite, it was quite expensive. But great, great experience with hospitality. People were amazing. I'm curious though, my last question to you is around inspiration. So if somebody comes to you and they say, look, I'm, I'm not. Maybe I haven't started my hotel or restaurant or I don't have the real estate for you to invest in yet, but I want to get there. I want to get to a place where you see us as something I'm just starting out. What advice would you give to them?

[Karosh Farazad]

Start small and believe in what you're doing. That's, that's really what I can say. Just start small. It's, you know, a baby doesn't start doing, you know, marathons from the day they're born. They have to crawl first and then walk and then start watching.

[Co-Host]

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[Host]

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[Co-Host]

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[Host]

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[Karosh Farazad]

Running, so the same scenario here. If you believe in the passion that you have, learn it inside out. Don't just learn the facade. Learn the back of the house, learn the front of the house. Learn how to speak with people. Just learn, read, understand. You can't have a passion without knowing what you have a passion for. That's how I look at different things. And hospitality you must either really have thick skin for it because it's really hard and more importantly you must have a good passion for it.

[Host]

I can see that I get shout out to all those people that work in hospitality. It is not easy. You have to put up with a lot of things and then you have to at the same time make everyone's experience. Like I was saying before, it's really ride. Their entire vacation or trip is riding.

[Co-Host]

On you and your service.

[Host]

But if people want to get in touch with you, they want to find out more information, how can they do.

[Karosh Farazad]

So they're welcome to send me an email and you can they can contact farazad advisory.com One word amazing.

[Host]

Well this has been great. I'm super inspired. Maybe one day I'm going to create that hotel and then we can chat about it.

[Co-Host]

You never know.

[Karosh Farazad]

Always welcome to my man.

[Host]

I'll see you out in Switzerland at some time. But I really enjoyed it today and congrats on the move. All the success. I can't wait to hear from a year from now how just amazing all the things are that you're working on. And thank you so much for joining us today on Founder Story.

[Karosh Farazad]

Thank you very much my man. I appreciate you.

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